Japan Clarifies Stance on U.S. Treasury Holdings Amid Trade Talks with Washington

Japan has clarified its position regarding its vast holdings of U.S. Treasury securities, stating it has no intention of using them as a bargaining chip in trade negotiations with Washington.

The clarification came from Finance Minister Katsunobu Kato on Sunday, following widespread media speculation triggered by his earlier remarks that hinted at the possibility. Speaking at a press conference in Milan, Kato emphasized that his previous comments had been misinterpreted.

“My comments were made in response to a question on whether Japan could, as a bargaining tool in trade negotiations, explicitly reassure Washington that it wouldn’t sell its Treasury holdings easily,” he explained. “They weren’t meant to suggest Japan would actually sell them.”

Japan holds over $1 trillion in U.S. Treasuries, making it the single largest foreign holder of American government debt. These assets are considered a vital financial buffer that allows Japan to maintain flexibility in global markets, especially when intervening in the currency markets to stabilize the yen.

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Kato had previously raised eyebrows in a televised interview on Friday when he stated that Japan’s U.S. Treasury holdings “could be used as a card” in trade talks—marking the first time a Japanese official had openly acknowledged the country’s potential leverage as a major U.S. creditor.

However, he also said in the same interview that whether or not Japan would actually use such a tactic was “a different question.”

Reiterating Tokyo’s consistent policy, Kato stated on Sunday: “The primary purpose of Japan’s Treasury holdings is to secure ample liquidity to intervene in foreign exchange markets when necessary. This has always been our position, and we do not plan to use the sale of U.S. Treasuries as a negotiation tool.”

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Kato’s clarification comes at a sensitive time in Japan-U.S. economic relations, with trade talks ongoing and heightened attention on currency fluctuations. The yen has recently slid to multi-decade lows against the dollar, prompting speculation about potential intervention by Japanese authorities.

The suggestion that Japan could use its massive U.S. debt holdings as leverage sparked concerns in financial markets and raised questions about the implications such a move might have on the long-standing economic partnership between the two countries.

However, Sunday’s statements aim to ease those fears and reaffirm Japan’s commitment to responsible and cooperative economic diplomacy.

Japan’s Treasury holdings serve multiple purposes:

• Liquidity Buffer: They allow Tokyo to quickly mobilize funds for currency interventions.
• Safe Investment: U.S. government bonds are considered one of the safest investment instruments globally.
• Leverage—In Theory: While rarely mentioned publicly, Japan’s position as a major creditor gives it theoretical leverage in geopolitical and economic negotiations.

By downplaying the idea of using Treasuries as a weapon in trade talks, Kato has signaled Japan’s intent to preserve stability in both currency markets and bilateral relations with the United States.